ACCA AAA ^INT Syllabus F. Other Assignments - Audit of performance information - Past Papers ^{1 / 3}

You are a manager working in the public sector audit department of Fern & Co. You are responsible for the audit of Moosewood Hospital, for the year ended 31 March 2017. You have recently visited the audit team, who are currently on site performing the fieldwork, to review the work performed to date and to discuss their progress. During your visit the audit senior informed you of the following matter:

During a review of the valuation of medical inventories, including medicines used in a variety of treatments at the hospital, it was noted that a number of items had passed their recommended use by dates. These were recorded on an inventory spreadsheet maintained by the financial controller and were easy to spot because they were highlighted in red. One of the audit team inspected a sample of the inventories in question and confirmed that their use by dates had expired. When asked about this, the financial controller stated that the audit team must be mistaken. The audit team requested to look at the spreadsheet again but he refused. The next day the finance director confronted the audit team accusing them of extending their investigations ‘beyond their remit’. He also threatened to remove them from the premises if they continued to ask questions which were not relevant to the audit of the hospital’s financial statements. Since then the audit team have been unable to complete their audit of medical inventories. They have also noted that the room where the inventories were previously kept has been emptied.

In addition to the audit of the financial statements your firm is also required to conduct an audit of the performance information of Moosewood Hospital. You are required to provide assurance with regard to both the accuracy and completeness of three key performance measures which are used to monitor the hospital’s efficiency and effectiveness. The performance measures, all of which the Hospital claims to have met, are:

1. To maintain an average patient to nurse ratio of no more than 6:1.
2. To achieve a minimum 75% annual usage of surgical rooms.
3. To ensure that the rate of admissions within 28 days for previously treated conditions does not exceed 3%.

Required:
(b) Explain the difference between a ‘performance audit’ and an ‘audit of performance information.’ (3 marks)

You are a manager working in the public sector audit department of Fern & Co. You are responsible for the audit of Moosewood Hospital, for the year ended 31 March 2017. You have recently visited the audit team, who are currently on site performing the fieldwork, to review the work performed to date and to discuss their progress. During your visit the audit senior informed you of the following matter:

During a review of the valuation of medical inventories, including medicines used in a variety of treatments at the hospital, it was noted that a number of items had passed their recommended use by dates. These were recorded on an inventory spreadsheet maintained by the financial controller and were easy to spot because they were highlighted in red. One of the audit team inspected a sample of the inventories in question and confirmed that their use by dates had expired. When asked about this, the financial controller stated that the audit team must be mistaken. The audit team requested to look at the spreadsheet again but he refused. The next day the finance director confronted the audit team accusing them of extending their investigations ‘beyond their remit’. He also threatened to remove them from the premises if they continued to ask questions which were not relevant to the audit of the hospital’s financial statements. Since then the audit team have been unable to complete their audit of medical inventories. They have also noted that the room where the inventories were previously kept has been emptied.

In addition to the audit of the financial statements your firm is also required to conduct an audit of the performance information of Moosewood Hospital. You are required to provide assurance with regard to both the accuracy and completeness of three key performance measures which are used to monitor the hospital’s efficiency and effectiveness. The performance measures, all of which the Hospital claims to have met, are:

1. To maintain an average patient to nurse ratio of no more than 6:1.
2. To achieve a minimum 75% annual usage of surgical rooms.
3. To ensure that the rate of admissions within 28 days for previously treated conditions does not exceed 3%.

Required:
(c) Recommend the examination procedures which should be used in auditing the performance information of Moosewood Hospital. (7 marks)

The Rothko University, a public sector entity, is a small university with approximately 2,000 students, which was established 10 years ago and specialises in vocational study programmes leading to the award of degrees in business, accountancy, finance, law and marketing. The highest performing students achieve a distinction on completing their degree programme, indicating excellence in the knowledge and understanding of their subject. Students pay tuition fees of $10,000 per year, and the degree programme is typically three years long.

The audit work in respect of the year ended 31 July 2015 is almost complete, but the audit senior has not yet completed the audit work in respect of performance information which is being published with the annual financial statements for the first time this year. It is a requirement in the jurisdiction in which the Rothko University is located that the performance information is audited as part of the external audit.

Details on the performance information are given below.

Required:
(i) Discuss the relevance and measurability of the reported performance information; and

(ii) Recommend the examination procedures to be used in auditing the performance information.

Note: The total marks will be split equally between each part. (10 marks)